Hollande Merkel Feud Simmers

Hollande Warned By Germans As He Collects Allies Against Merkel

The simmering feud over policy between Germany and France was evident last week.

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Amiel Ungar, 17/06/12 13:40

France

Reuters

While Europe awaits the results of the Greek vote, the growing tension concerning the financial status of Spain and Italy serves as a reminder that Greece is small fry and the main danger it poses is to serve as a trigger, causing further tremors and panic within the euro zone.

What should cause greater forebodings in the euro zone is the tension between the government of Angela Merkel in Germany and the Socialist Presidency and Cabinet in France.

Last week, Francois Hollande appeared to be shopping for allies against the German Chancellor when he held talks with Italian Prime Minister Monti and then hosted the leadership of the German SPD opposition in Paris. Generally, one hosts a leader of the government of a foreign country before one invites that country's opposition.

Some viewed this meeting as payback on the part of Mister Hollande for the snub that he received from Angela Merkel when he was campaigning against former president Nicolas Sarkozy. Then, the German Chancellor refused to meet Hollande and actually campaigned with Sarkozy.

But it was more than protocol. Both Merkel and German Finance Minister Wolfgang Schäuble criticized the fiscal policy of the new French government, citing, for example, the decision to bring down the retirement age of workers who had joined the labor force at the age of 18 back to 60 from 62.

They are afraid that France will damage her competitiveness via such measures and forfeit her AAA rating. This would leave Germany practically alone in attempting to sustain the euro zone. Germany's leaders argue that the Federal Republic cannot and will not do it on its own.

Merkel received support from an unexpected source – former British Prime Minister Gordon Brown. Brown called upon the European leaders to abandon halfway measures in fixing the situation, claiming that not only could Spain and Italy face the need for bailouts that could wreck the euro zone, but it was now conceivable that France as well would require a bailout.

Brown is the first major name to suggest the possibility of a French bailout.